First Extract from the award-winning bestselling book „Marketing: Principles and Practice. A management-oriented approach“, 4th edition, Lübeck 2021
The Internet-of-Things (IoT) is a network of interconnected devices, systems and services within the existing Internet infrastructure. The core of the IoT is that it allows for ‘all things connected’ in the communication between devices and objects, creating a more direct integration between the physical world and computer-based systems.
By capturing and analyzing the data that come from the sensors at the endpoints of the connected objects, the IoT’s value lies in its ability to track, measure and create ‘smart’ devices that bring considerable benefits to individuals and businesses
Basically, an IoT system consists of three elements:
- Sensors: Sensors create data about the status of manufacturing equipment and its context, and work as an information interface between physical devices and the Internet. Sensors add connectivity to manufacturing equipment and material components, and are the building blocks of proactive and autonomous repair and maintenance concepts.
- Actuators: Actuators are all sorts of components of automated systems that – based on signals from the sensors – drive movement of physical effects, such as moving robots, opening of windows in a house, etc. The IoT builds on Internet-connected actuators, which enable often centralized operators to remote control of a process, and to conduct remote repair and maintenance activities.
- IT-Internet (‘Cloud’) driven services, represented a smart phone app
For example, a smartphone app, connects the physical objects in a house in order to create a good indoor climate. In this way, IoT may enhance customers’ lives and make them ‘smarter’ (intelligent), while at the same time feed data to develop the firms’ competitive advantages, making it possible to more directly, for example, target, monitor and deliver more specific and customized experiences. In order for IoT-oriented organizations to create and capture customer value, they must work together in order to solve customer problems, e.g. in order to create a good in-door climate. The challenge is to get different manufacturers’ complementary IoT platforms to work together with the final goal of establishing a smartphone app, that can get the heating system to work together with the air condition system and opening of the windows at the right time.
Marketing has historically been about communicating messages and ensuring that it goes to the target persons – framing a product and then deciding what to tell the target market. The next phase takes marketing a step further – not only targeting the target audience but taking the next step for them and integrate a true Service-Dominant logic (SD-logic) by “doing the job for them”.
IoT data is real usage data. Compare this to surveys or focus groups marketers have counted on for so long. We used these techniques because they provided us with some helpful insights but there is nothing more powerful than the insights, we can gain from IoT. Teams can see exactly how a customer is using a product, what specific features they are using and which they are not. Just pure facts without any bias or the risk of perception misguiding the feedback. And it is not only how they are using a product. Marketers can also identify design and performance issues, address them immediately and refine over time. Just imagine having a product that is constantly getting better rather than outdated by the next new gadget. When marketers correlate this with other information about their products and customers, they can get a much more sophisticated understanding of the people using their products.
Development and sustainability of IoT marketing is highly dependent on the acquisition of the new skills for the marketer. As the IoT solution becomes a reality, the interactions between consumers and things undergo emergence and contribute something greater than the sum of the parts resulting in new consumer experiences embodying design and complexity. For example, the connected devices in a home can create safe and secure home, with a good indoor climate.
The increasing challenge for marketers is shifting away from the traditional perspectives of marketing, sales and advertising towards design with a focus on architecting the interactions and orchestrating the consumer experiences underpinning IoT.
The role of the marketer greatly changes with IoT and responsibilities include developing IoT driven experiences through consideration of the product flows and integration with key consumer touch points, establishing the overall product interaction with customers and setting up pre-defined actions built on automating customer journeys.
This role is unique from previous marketing roles in the IoT has an ability to actually change customer behaviour for benefit of both the customer and marketer through monitoring the sensors. The data acquisition from sensors has not been available previously to marketers and represents an opportunity to add customer value through servicing and engaging the customer proactively in brand conversations.
The marketer can play a leadership role in making IoT data the means by which marketers can truly understand customers and products. Furthermore, marketers can join forces with the heads of engineering, research and development, and sales. The use of IoT data to create more customer-centric products, offer new services, and find and sustain new competitive differentiation for the company.
Following steps are involved in the marketer’s process of using IoT for gaining more customer insights and using appropriate marketing tools towards target customers:
- Analyze customer buying habits across platforms
- Gather previously unobtainable data about how consumers interact with devices and products
- Gain deeper insights into where the customer is in the customer journey
- Provide real-time point-of-sale notifications and targeted ads
- Quickly resolve issues of ‘getting the job done’ and keep customers happy
For example, companies like KONE, one of the global leaders in the elevator and escalator industry, might be a heavy user of IoT. KONE delivers a smoother, safer and more personalized people flow experience for building users, including consumers. We can imagine a consumer in the elevator at the mall, seeing holiday ads from retailers on the floor they are going to, with the ads customized based on the weather outside. On a snowy day in New York City, customers might see deals on winter coats while in rainy San Francisco they might see ads focused on umbrellas.
For further explanation about developing business model using IoT – please look into this journal article, which explains how Danfoss (www.danfoss.com) is building their relationships to external partner via IoT platforms: